The Socialization
of AmericaThe
Bush administration is lost in rhetoric and does not realize
that the nation is declining - economically, socially, politically
and in its environmental obligations. A waged war and escalated
oil prices remind present times of the early 1970's, an era that
set conditions for a later stagflation. Government and business
re-invented themselves to form National Competitiveness, a combination
of increased productivity and technological advances, and solved
the stagflation problem. A revival of National Competitiveness
might not be applicable to the unfolding situation. Elevated
productivity gains are no longer feasible and the mixed economies
of the fast growing nations of China, India and Russia have advantages
that are not easily overcome. The mixed economy allows controls
of currency exchange rates, wages, prices, production facilities,
health care expenditures and pension plans, which enable a quicker
response to challenges and yield a competitive edge in the global
economy. Changes in life style and a return to the social awareness
that characterized the Roosevelt era might be more applicable
solutions for assuring a prosperous America.

The economics tell the
better part of the story.

Economic DeclineSeveral major economic
trends don't favor the U.S. economy.

American trade balance
has record deficits that increase U.S. liability to the world.

YEAR

EXPORTS
$trillions

IMPORTS
$trillions

DEFICIT
$billions

2000

1.070

1.449

379

2001

1.006

1.369

363

2002

0.975

1.397

422

2003

1.020

1.517

497

2004

1.147

1.764

617

Source:U.S.
Census Bureau, Foreign Trade Division.

The dollar fall compared
to the Euro has not decreased the trade gap.On March 1,
2001, the dollar had a worth of 1.076 Euros.
On March 1, 2005, the dollar had a worth of 0.758 Euros.
Economic analysts expected the 30% decline in the dollar would
greatly increase exports and decrease the trade gap. Exports
have only increased by 14%, a small amount for a time when world
trade is rapidly expanding. The trade gap has widened rather
than lessened. What could be the reasons for these contrary phenomena?

The United States is exporting
goods and services that are not competitive and mildly depend
upon pricing.

The United States is importing
goods that it can no longer manufacture and is captive to those
markets regardless of their prices.

The United States is refusing
to lower its energy usage and is depending on foreign sources
at the time that global demand is high and has raised its costs
for oil and gas to record levels.

The United States is deficient
in entering the Chinese markets while becoming dependent on imports
from China. The U.S. trade gap with China has risenfrom
$101 billion in year 2000 to $162 billion in 2004. Most other
industrialized countries have trade surpluses with China.

The dollar is artificially
supported and could drop precipitouslyThe dollar
has declined but still might be overvalued:

Re-cycling of dollars
from America's negative balance of payments to U.S. securities
maintains the dollar's value.

OPEC's pricing of petroleum
in dollars increases demand for dollars.

The dollar is still the
currency for world trade and the world demands dollars.

China's attachment of
its Yuan to the dollar also maintains the dollar's value.

If the following occur,
each of which is highly possible, the dollar's value could collapse
and cause other economic problems:

If China upward values
the Yuan, prices of Chinese imports will greatly increase.

If nations convert their
dollar assets into other investments, or discontinue recycling
their surplus dollars, US property and stock markets would decline.
South Korea and Japan have hinted at investing in other assets.

If OPEC barters petroleum
for Euros, dollars will become less valuable. Saddam Hussein's
Iraq had taken that step; one reason Iraq might have been attacked.
Iran's government has intimated it will request Euros for oil
sales. Venezuela's President Hugo Chavez seems intent on deserting
the dollar and hasmade
deals with 12 Latin American countries and Cuba for trading its
oil.

Manufacturing production
and employment have greatly decreasedManufacturing,
which is the essential industry for an industrialized capitalist
economy, has been stagnant for several years. The Bureau of Labor
Statistics estimated American manufacturing capacity at only
78.5% in Jan 2005.

Production has remained
stagnant but manufacturing employment has greatly decreased.
The left graph
below describes the abrupt decrease in manufacturing employment
to 1950 levels since the start of the North Atlantic Free Trade
Agreement (NAFTA).
The right graph below shows a monotonic decrease in the significance
of manufacturing jobs, which is due to several factors; increased
productivity, decline of unions, outsourcing, foreign competition
and transition to a service economy.Source: Bureau of
Labor statistics

Outsourcing is acceleratingThe exact economic
impact of outsourcing and the numbers of U.S. jobs it has transferred
to foreign countries have been difficult to quantify. Outsourcing
proponents claim benefits in competitiveness and ultimate financial
gain to the American system. Outsourcing opponents counter with
the argument that increased competitiveness assists selected
businesses and not the nation. Outsourcing clearly results in
losses of jobs, internal purchasing power and tax revenue. Some
statistics:

An MIT Report claims "outsourcing"
activity rose from 12.4% to 22.1% between 1987 and 2002:

BBC News, May 17, 2004,
predicts that "by
2015 a total of 3.4 million previously US-based positions will
have been relocated overseas."

Social DeclineThe U.S. has
social problems that are growing rather than diminishing. The
administration expects that private initiatives will resolve
the problems.

(1) Relations with the
world community
- American philosophy of "preventive war" and military
excursions have alienated many nations from the United States.
Trade agreements in the European Union and South East Asian countries
(directed by China) are depriving America of markets. Iran, Sudan,
Angola and Venezuela are inviting investments that exclude the
United States and which will eventually deprive America of valuable
resources.
In Latin America, America's principal sphere of influence, several
countries (Brazil, Chile, Venezuela and Uruguay) are considered
mildly socialist and prepared to discard American influence.
Meanwhile, China is investing heavily in Latin America.

China's President
Hu Jintao visited Argentina, Brazil and Chile in Novemberand
promised to lay out tens of billions of dollars on improving
the region's infrastructure. He also vowed that China's imports
from Latin Americaalready showing an impressive rise would
grow even faster; and he added Argentina and Brazil to China's
list of approved tourist destinations. Dec
29th 2004 | BUENOS AIRES, From The Economist print edition

(2) Social Security
- While analysts
predict a bankrupt social security system in mid-century, no
adequate solution, except a private rescue plan, is being offered.(3) Health care - Health
care costs grew by 14 percent in 2003 and are expected to continue
growing. Medicare costs are escalating and agency officials have
stated they plans to charge seniors 15 percent more for premiums
next year and pay doctors about 4 percent less for service. In
the private sector, manufacturers are shifting the health care
and retiree benefits to their employees.
(4) Pension Plans - According to the Pension Benefit Guaranty
Corp (PBGC), the percentage of workers who have pensions that
guarantee a specific monthly income has decreased from 78% in
1980 to 50% in 2005. The PBGC, which insures pension funds and
assumes pension obligations from failed pension plans and bankrupt
corporations, claims there are 31,000 pension plans run by American
businesses and these plans have an estimated collective shortfall
of $450 billion, a record figure.

Political DeclineThe political
trend finds a common ground at what is considered the center
of the political spectrum. The two major parties recite differences
but due to their commitment to the public center have similar
programs. Bold social initiatives have become relics of the past.
The status quo is maintained and domestic policies are left to
the private sector.

Environmental DeclineThe United
States has refused to join the Kyoto Protocol that limits emissions
of greenhouse gases and combats global warming. Why? Secretary
of State Condoleeza Rice says that joining the Kyoto Protocol
would hurt the U.S. economy - which means lowering corporate
profits. Global warming could greatly harm the American people,
as well as the rest of the world, but that doesn't seem to matter.

The Socialization
of AmericaThe rapid growth
of the mixed economies of China, India and Russia demonstrate
that a measure of control over currency exchange rates, wages,
prices, production facilities, health care expenditures and pension
plans give a nation a competitive edge in the global economy.
These nations have a long way to go before their productivity
peaks. Meanwhile, they can maintain wages low, increase them
only as productivity increases and therefore maintain prices
at a steady level.

America will not adopt
the political and economic features of the mixed economies. However,
the huge trade deficit, government deficits, decline in manufacturing,
shifts to outsourcing to become competitive and loss of value
of the dollar show that private industry cannot counter the aggressive
competition of the partially socialized nations. The United States
has no choice but to become more social and align government
and industry in common goals that will correct the deleterious
trends.

Cooperation between government
and industry rather than free-wheeling economics will enable
more rational decisions and predictable operations.

Changes in life style
that conserve energy (smaller cars, smaller houses) will lower
energy prices, assist in the balance of payments and direct spending
to domestic products.

Distribution of wealth
will increase spending on vital goods and reduce spending of
superfluous goods. It will also bring citizens closer together,
increase faith in the system and ameliorate social problems;
eg.: crime, poverty, drugs.

Ending of military adventures
will reduce military spending, reduce the deficit and allow re-direction
of wasteful military programs to more beneficial social programs.

A National Pension plan,
properly prepared of course, will resolve the Social Security
and pension crises.

A National Health plan,
properly prepared of course and similar to those in other western
nations, will resolve the Health crisis.

Agreements on "outsourcing"
will limit job losses.

Participation in the Kyoto
Protocol will enable a more serious challenge to the global warming
threat.

Government assistance
will revive manufacturing.

Improved regulation of
immigration will preserve jobs for American citizens and prevent
competition for wages.

The world firmly rejected
the extreme socialist economies that limited prosperity. However,
emerging nations have not embraced the free-wheeling capitalist
adventures identified with the current American administration
- and for good reason - concentration of wealth, misuse of limited
resources, and intense competition for markets that can lead
to war, are the eventual results of a world system that totally
embraces rugged individualism. The global economy has been pioneered
by the United States but has not been a perfect fit for the pioneering
nation. In order to provide prosperity for its people, the United
States must implement policies that offset the deleterious effects
of globalism. American history shows that private industry has
never been the sole source of solutions to recurrent economic
problems. Only changes in life style and a return to the social
awareness that characterized the Roosevelt era can solve the
economic, social, political and environmental declines predicted
for America's future.